Ecommerce firms’ annual sales from each vendor capped at 25%

Ecommerce players like Flipkart and Amazon will not be allowed to market more than 25 per cent of its annual sales coming from one vendor, the government on Monday 28th August, clarified. The government had earlier mandated 25 per cent maximum sales from a single vendor but had not specified the period for computation of sales.

“An ecommerce entity will not permit more than 25 per cent of the sales value on financial year basis affected through its marketplace from one vendor or their group companies,” the Department of Industrial Policy and Promotion (DIPP) said in its consolidated FDI policy circular, released here.

An official, who did not wish to be named, said that this provision encourages e-market players to sell goods from different vendors.

The DIPP in a tweet stated that restriction of 25 per cent on sales of one vendor through a marketplace is to be computed on financial year basis. In the foreign direct investment (FDI) circular, the DIPP has also included the definition of ‘competent authority’ to grant government approval for foreign investment.

It said the authority means the concerned administrative ministry/ department empowered to grant government approval for foreign investment under the extant FDI policy and FEMA (Foreign Exchange Management Act) Regulations. As the foreign investment promotion board has been abolished, the respective ministries have been authorised to approve foreign investment proposals.

Further, the government clarifies that conversion of an LLP (limited liability partnership firms) into a company and vice-versa is permitted under automatic route for sectors where 100 per cent FDI is allowed.

The DIPP, which deals with FDI related matters, compiles all policies related to foreign investment regime into a single document to make it simple and easy for investors to understand.